The Securities and Exchange Commission announced that on February 26, 2001, the Honorable Judge Sandra S. Beckwith entered an Order of Permanent Injunction against Stephen G. Donahue ("Donahue"), a resident of Cincinnati, Ohio, and an Order of Preliminary Injunction against Donahue Securities Inc. ("DSI"), an Ohio corporation registered with the Commission as a broker-dealer since 1989. The Commission's Complaint, filed on February 26, 2001, alleged that Donahue, the former president of DSI, has confessed that since 1989, Donahue and DSI have engaged in a scheme to misappropriate at least $6 million dollars from approximately 200 to 250 customers of DSI.

The Commission's Complaint further alleged that Donahue and DSI represented to their clients that they would invest the clients' funds in a money market fund or a DSI tax free bond fund paying interest ranging from 5% to 6%. However, the Complaint alleged, that both funds did not exist and that instead of investing the clients' funds as promised, Donahue and DSI deposited the money into an account controlled personally by Donahue and used the money to pay business expenses for DSI and two additional companies owned at least in part by Donahue, SG Donahue & Company, Inc. and Donahue Mortgage Company. Finally, the Complaint alleged that Donahue also used client funds to pay personal expenses, including paying his personal taxes, making a down payment on and renovating a condominium in Florida, purchasing vacant land on which to build a home and purchasing building materials for the home.

The Orders, entered pursuant to Donahue's and DSI's consents and without admitting or denying the allegations contained in the Commission's Complaint, permanently enjoin Donahue and preliminarily enjoin DSI from further violating Section 17(a) of the Securities Act of 1933, Sections 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and from violating or aiding and abetting violations of Section 15(c) of the Exchange Act and Rule15c1-2 thereunder. In addition, the Orders freeze all of Donahue's and DSI's assets, prohibit Donahue and DSI from destroying any documents, order Donahue and DSI to account for all of their ill-gotten gains and order Donahue to disgorge his ill-gotten gains and pay civil penalties in an amount to be determined in a separate hearing by the Court.